29.1% of All Edgware Properties were Bought Without a Mortgage in the Last 7 Years

For most Edgware people, a mortgage is the only way to buy a property. However, for some, especially Edgware homeowners who have paid off their mortgage or Edgware buy to let landlords, many have the choice to pay exclusively with cash. So the question is, should you use all your cash, or could a mortgage be a more suitable option?

Well, looking at the numbers locally…

8,933 of the 30,731
property sales in the last 7 years in Barnet were made without a mortgage (i.e.
29.1%)

Interesting when compared with the national average of 31.9%
cash purchases over the last seven years. Next, I wanted to see that cash
percentage figure split down by years. As you can see from the graph, this
level of cash purchases vs mortgage purchases has remained reasonably constant
over those seven years…

Next, if you are going to go for a mortgage, the next
question has to be whether you should fix the rate or have a variable rate
mortgage. In the last Quarter, 90.57% of people that took out a mortgage, had a
fixed rate mortgage at an average interest rate of 2.27%, although what did
surprise me was only 65.79% of the £1.429 trillion mortgages outstanding in the
whole of the UK were on a fixed rate. The level of mortgage debt compared to
the value of the home itself (referred to as the Loan to Value rate – LTV) was
interesting, as 61.9% of people with a mortgage have a LTV of less than 75%.
Although, one number that did jump out at me was only 4.33% of mortgages
are 90% and higher LTV – meaning if we do have another property slump, the
number of people in negative equity will be relatively small.

Next, looking at the actual number of properties sold, it
can be clearly seen the number of house sales has dipped slightly in 2018…

So those are the numbers … let us have a look at the pros
and cons of taking a mortgage, with specific focus on Edgware buy to let
landlords.

Taking a mortgage will help a landlord increase their
investment across more properties to maximise the return, rather than putting
everything into one Edgware buy to let property. This will enable the landlord
to ensure if there a void in the tenancy, there should still be rent coming
from the other properties. The flip side of the coin is that there is a
mortgage to pay for, whether or not the property is let.

The other great motivation of taking a mortgage is that landlords
can set the mortgage interest against the rental income, although that will only
be at the basic rate of tax by 2021 due the recent tax changes. Banks and
Building Societies will characteristically want at least a 25% deposit (meaning
Edgware landlords can only borrow up to 75%) and will assess the borrowing
level based on the rental income covering the mortgage interest by a definite
margin of 125%.

A lot will depend on what you, as a Edgware landlord, hope
to attain from your buy to let investment and how relaxed you would feel in making
the mortgage payments when there is a void (interestingly, Direct Line
calculated a few months ago that voids cost UK landlords around £3bn a year or
an average of £1000 per property per year). You also have to consider that interest
rates could also increase, which would eat into your profit … although that
can be mitigated with fixing your interest rate (as discussed above).

So, with everything that is happening in the world, does it make sense to buy rental properties? Now we help many newbie and existing landlords work out their budgets, taking into account other costs such as agent’s fees, finance, maintenance and voids in tenancy. The bottom line is we as a country aren’t building enough property, so demand will always outstrip supply in the medium to long term, meaning property values will keep rising in the medium to long term. That’s not to say property values might fall back in the short term, like they did in 2009 Credit Crunch, the 1988 Dual MIRAS crash, the recession of the early 1980’s, the 1974 Oil Crisis, the early 1930’s Great Depression … yet every time they have bounced back with vigour. Therefore, it makes sense to focus on getting the best property that will have continuing appeal and strong tenant demand and to conclude, buy to let should be tackled as a medium to long term investment … because the wisest landlords see buy to let investment in terms of decades – not years.

If you are thinking of selling your Edgware home or If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Edgware Property Market together with regular postings on what I consider the best buy to let deals in Edgware, out of the many of properties on the market, irrespective of which agent is selling it, then feel free to get in touch! Email me at Steve@benjaminstevens.co.uk

If you are in the area feel free to pop into the office we are based at 194 Station Road Edgware Middlesex HA8 7AT– the kettle is always on.

Don’t forget to visit the links below to view back dated deals and Edgware Property News.

About the blog

This blog follows the property market in Edgware and the surrounding area, giving insight, analysis and comment on all property related matters and the local property market.
If you are interested in buying, renting, investing in Edgware then this is the blog to follow to keep up to date with all the information you need.

The author

Steve Wayne is the Managing Director of Benjamin Stevens Estate Agents, working locally in property since he was 17
Since 2004 he has had his own firm with branches of Benjamin Stevens in Edgware & Bushey Heath.